Triest Talk

Over the years which is over 30 now that I've been an insurance agent and agency owner, I get calls or emails from clients confused as to what to do when they rent a car. It usually goes something like this,

"I'm going on vacation and will be renting a car for five days in Florida. Should I buy the extra insurance offered? I don't want to because it's really expensive and my neighbor said that my auto policy would take care of covering this."

First of all please don't listen to the advice of your neighbor unless they're an insurance agent, lawyer or financial planner. They're not being to be held responsible for the bad advice they give to you. Instead take our advice which you may or may not like but it's the best advice.

Before starting with our recommendations I need to define a few terms that are commonly used.

CDW or the Collision Damage Waiver or LDW or Loss Damage Waiver: I'm going to refer to it as the CDW. All are pretty much the same. When you rent a car, you're held responsible for damaging the rental car company's vehicle. The CDW is to insurance that you're buying from the rental car company. Instead you're paying them to waive their right to come after you for damaging their property that was under your care, custody and control.

There are a few scenarios with regard to renting a car so I'll address each separately.

1. Renting a car because our car is getting repaired after an accident.

Most insurance policies will provide coverage for the rental car in this situation but the rental car will be covered with the same collision and comprehensive limits and deductibles that are on the damaged car. If the damaged car doesn't have collision coverage then the rental car won't have it either. If you have a $1000 collision deductible then your rental car will have a $1000 collision deductible. There a couple of very good alternatives to use in this situation and in order to avoid paying for the CDW.

a. You should be able to pass on buying the CDW if the car that you're substituting for has comprehensive and collision coverage but check with your agent first or check your insurance policy first. b. If you want to be doubling sure and/or don't have collision or comprehensive on the car you substituted for then you need to buy the CDW with an exception that can save you a considerable amount. Check with your credit card company. Many of the premier cards include as a card benefit free auto rental CDW coverage if you use their card to rent the car.

2. Renting a car because you're on vacation in the United States.

In this case you're not substituting a car for one that is already insured. You're actually adding an exposure and as such most insurance policies won't provide coverage if you damage the rental car.

a. My best advice. Pay for the CDW. I know it is expensive and you really don't want to pay for it but this is your vacation. Lets say you damage their car or don't think that you caused any damage and when you return the car they say it is damaged. You didn't notice but someone dented the rear when you had it parked. Unfortunately that's your responsibility and you didn't buy the CDW so they'll ask for a deposit on your trusty credit card of choice to pay for the damages. This makes for a horrible way to end what may have been an otherwise wonderful vacation. IF you had taken my advice, then you just hand the nice rental car agent the keys when you drive up to return the car and you walk away happy.

b. The other alternative is to use a credit card that offers the rental car CDW benefit as explained above. You'll still be responsible for dealing with a claim after your come home from vacation.

3. Renting a car to use for business.

This one gets really tricky. Here are some things to consider.

a. If you have a business auto policy and not a personal auto policy then you need to buy the CDW. Most business auto policies don't extend to a rental car while renting it for any reason. Buy the CDW.

b. If you have a business auto policy or a personal auto policy and have a business credit card that provides the CDW benefit, check with the credit card company to see if you can rent the car using this credit card and waive the CDW.

c. If you have a business auto policy then the liability coverage won't extend to cover you while renting a car unless your policy has what's called "hired auto coverage". This is a rider added to a business auto policy and/or a business insurance policy. We highly recommend adding it to your policy.

d. If you have a personal auto policy but are renting in a business name then this gets really sticky. Call me to discuss this since it is complicated and goes beyond what I can cover in this simple blog.

Final word here..... When in doubt read your insurance policy or ask your insurance agent for their advice